How to create a financial forecast for a squash ball manufacturer?
Developing and maintaining an up-to-date financial forecast for your squash ball manufacturing business is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a squash ball manufacturing business financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a squash ball manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your squash ball manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a squash ball manufacturing business enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date squash ball manufacturing business forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your squash ball manufacturing business's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is used as input to build a squash ball manufacturing business financial forecast?
A squash ball manufacturing business's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing squash ball manufacturing business, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a squash ball manufacturing business startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the squash ball manufacturing business running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your squash ball manufacturing business's financial forecast.
The sales forecast for a squash ball manufacturing business
From experience, it usually makes sense to start your squash ball manufacturing business's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your squash ball manufacturing business (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your squash ball manufacturing business's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- Product Innovation: As a squash ball manufacturer, you know the importance of constantly improving your product to stay competitive in the market. A new, high-quality material or a unique design can drive up the average price of your squash balls, leading to higher revenues.
- Demand for Squash: The popularity of squash as a sport can directly impact your business's sales. An increase in the number of people playing squash can lead to a higher demand for squash balls, resulting in more monthly transactions.
- Seasonal Trends: The demand for squash balls may vary throughout the year, with peak seasons during colder months when indoor sports are more popular. Keeping track of these seasonal trends can help you predict and plan for fluctuations in your sales.
- Competition: The number and strength of competitors in the market can affect your business's average price and monthly transactions. A highly competitive market may drive down prices and make it harder to attract customers, while a less competitive market may give you more control over pricing and sales.
- Retailer Relationships: Your business's relationships with retailers can have a significant impact on your sales. Strong partnerships with popular retailers can increase your product's visibility and accessibility, potentially leading to higher sales and prices.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a squash ball manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your squash ball manufacturing business on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a squash ball manufacturing business will include some of the following items:
- Raw materials: As a squash ball manufacturing business, your main expense will be the cost of raw materials such as rubber, felt, and glue. These materials are essential in producing high-quality squash balls.
- Labor costs: You will need to pay your employees who are involved in the production process, including machine operators, quality control specialists, and packaging staff. Their salaries and benefits should be included in your operating expenses forecast.
- Utilities: This includes the cost of electricity, water, and gas for your manufacturing facility. As a business that relies heavily on machinery, your utility bills can add up quickly.
- Rent: If you are not operating your business from a property that you own, you will need to pay rent for your manufacturing facility. This expense can vary depending on the location and size of your facility.
- Marketing and advertising: In order to attract customers and grow your business, you will need to invest in marketing and advertising efforts. This can include online ads, print ads, and sponsorships of squash events.
- Packaging materials: In addition to the cost of raw materials, you will also need to purchase packaging materials such as boxes, labels, and tape to package your squash balls for sale.
- Transportation: If you are selling your squash balls to customers outside of your local area, you will need to factor in the cost of transportation to deliver your products. This can include shipping fees or fuel costs for your own delivery vehicles.
- Accountancy fees: It is important to keep accurate financial records for your business. Hiring an accountant or using accounting software can help you track your expenses and ensure compliance with tax laws.
- Insurance: As a manufacturer, it is important to protect your business from potential risks and liabilities. Consider purchasing insurance policies such as product liability insurance and property insurance.
- Software licenses: You may need to purchase software licenses for programs such as inventory management, accounting, and production planning. These licenses can come with annual or monthly fees that should be included in your operating expenses forecast.
- Banking fees: As a business, you will likely have bank accounts for managing your finances. Be aware of any fees associated with these accounts, such as transaction fees and monthly maintenance fees.
- Maintenance and repairs: Your machinery and equipment will require regular maintenance and occasional repairs. These costs should be factored into your operating expenses forecast to ensure your production process runs smoothly.
- Office supplies: While not a major expense, you will need to purchase office supplies such as paper, pens, and printer ink to keep your business operations running smoothly.
- Legal fees: As a business owner, you may need to seek legal advice and services for contracts, patents, or other legal matters. These fees can add up, so it is important to include them in your operating expenses forecast.
- Training and development: In order to maintain a skilled workforce, you may need to provide training and development opportunities for your employees. This can include workshops, seminars, or certifications, which should be included in your operating expenses forecast.
This list will need to be tailored to the specificities of your squash ball manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a squash ball manufacturing business?
Creating and expanding a squash ball manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a squash ball manufacturing business could include elements such as:
- Machinery and equipment: This includes the cost of purchasing specialized machinery and equipment for the manufacturing process, such as injection molding machines, curing ovens, and cutting machines.
- Facility renovation: If you are starting your squash ball manufacturing business from scratch, you will need to renovate a facility to meet the specific requirements of the manufacturing process. This may include installing proper ventilation systems, flooring, and lighting.
- Raw materials inventory: In order to produce squash balls, you will need to purchase raw materials such as rubber, felt, and adhesives. These materials will need to be purchased in bulk and stored in a designated inventory area.
- Production molds: Squash balls are made using specialized molds, which can be expensive to purchase. These molds will need to be replaced periodically as they wear out over time.
- Shipping and handling equipment: Once your squash balls are produced, they will need to be packaged and shipped to customers. This may require the purchase of packaging materials, labeling equipment, and a delivery vehicle.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your squash ball manufacturing business.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your squash ball manufacturing business
The next step in the creation of your financial forecast for your squash ball manufacturing business is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a squash ball manufacturing business?
Now let's have a look at the main output tables of your squash ball manufacturing business's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your squash ball manufacturing business is likely to be in the years to come.
For your squash ball manufacturing business to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established squash ball manufacturers, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
The projected balance sheet gives an overview of your squash ball manufacturing business's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your squash ball manufacturing business. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow projection
The cash flow forecast of your squash ball manufacturing business will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the squash ball manufacturing business's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your squash ball manufacturing business is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your squash ball manufacturing business's financial plan.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your squash ball manufacturing business's financial forecast?
Using the right tool or solution will make the creation of your squash ball manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your squash ball manufacturing business's projections
The modern and easiest way is to use an online financial forecasting tool such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our projection software for free by signing up here.
Calling in a financial consultant or chartered accountant
Enlisting the help of a consultant or accountant is also a good way to obtain a professional squash ball manufacturing business financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your squash ball manufacturing business's financial forecast?
Creating an accurate and error-free squash ball manufacturing business financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting software like The Business Plan Shop is built for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own squash ball manufacturing business, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your squash ball manufacturing business future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a squash ball manufacturing business, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Example of financial forecast
- How to create a sales forecast for a business?
- Financial forecast template for a business idea
Know someone who owns or is thinking of starting a squash ball manufacturing business? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
